United States ex rel. Barko v. Halliburton Co.

241 F.Supp.3d 37

UNITED STATES of America EX REL. Harry BARKO, Plaintiff,

v.HALLIBURTON COMPANY, et al., Defendants.

Case No: 05-cv-1276-RCL

United States District Court, District of Columbia.

Signed March 14, 2017

David K. Colapinto, Michael David Kohn, Stephen M. Kohn, Kohn, Kohn & Colapinto, LLP, Anthony C. Munter, Price Benowitz, LLP, Washington, DC, for Plaintiff.

Craig D. Margolis, Kathleen C. Neace, Alden Lewis Atkins, Tirzah S. Lollar, Vinson & Elkins LLP, John Martin Faust, Law Offices of John M. Faust, PLLC, Washington, DC, for Defendants.

MEMORANDUM OPINION

Royce C. Lamberth, United States District Judge

I. INTRODUCTION

In the early 2000s, the United States engaged in a war in Iraq, which persisted for several years. To support the military on the ground, the United States government contracted with civilian companies to provide a wide variety of services. Defendant Kellogg, Brown & Root ("KBR") received one of these contracts. This dispute revolves around KBR's contracting practices while in Iraq, specifically, KBR's subcontracts with defendant Daoud & Partners ("D&P").¹ Relator Harry Barko filed an amended complaint in 2007 alleging numerous violations of the False Claims Act [ECF No. 12]. KBR has moved for summary judgment [ECF No. 136].² The Court will grant KBR's motion and will award summary judgment to KBR on the entirety of Mr. Barko's Amended Complaint. It will not allow additional time for discovery.

II. BACKGROUND

In 2007, Mr. Barko, a former subcontract administrator for KBR in Iraq from July 2004 through June 2005, brought claims under the False Claims Act, 31 U.S.C. § 3729et al. , against KBR and D&P, a KBR subcontractor. KBR is a government contractor who provided services and materials to the United States government during the war in Iraq under the U.S. Army's Logistics Civil Augmentation Program ("LOGCAP"). In 2001, the government awarded the LOGCAP III contract to KBR, a prime contractor. KBR then selected subcontractors, such as D&P, to provide labor, laundry services, construction, and well-drilling at the "B Sites" in Western Iraq. Mr. Barko paints a picture of a contracting environment rife with fraud, collusion, and other anticompetitive activity, claiming that KBR submitted false claims to the government by accepting kickbacks, rigging bids, inflating costs, and otherwise engaging in improper procurement practices. The Court will first discuss the LOGCAP III contract, then will summarize the four subcontract areas at issue as well as Mr. Barko's allegations with regard to each of them, and finally will address the procedural history of this case.

A. LOGCAP III

In order to analyze Mr. Barko's claims and the propriety of summary judgment, the Court finds it prudent to first summarize the fairly complicated contracting scheme at issue here. LOGCAP "was established in 1985 to facilitate civilian contractor logistical support for United States military forces deployed overseas, principally in countries with which the United States does not have treaties or agreements that would enable the host country to provide such support." United States ex rel. Watkins v. KBR, Inc. , 106 F.Supp.3d 946, 951 (C.D. Ill. 2015). Under LOGCAP, the government awards contracts to a single company—a prime contractor—to provide various services in support of the military, such as laundry, construction, and food. The government awarded KBR the LOGCAP III contract on December 14, 2001 to provide logistical services to the military in Iraq and other countries. Under the LOGCAP III contract, KBR solicited bids for certain services and awarded subcontracts to various bidders for those services. At times, KBR and subcontractors negotiated change orders that modified the terms of the subcontract.

Although the Court will quote from an exhibit submitted by KBR—the declaration of Global Director of Procurement and Materials for KBR Cheryl Ritondale—the Court finds that there are no genuine disputes of material facts regarding the following information. The LOGCAP III contract was "an Indefinite Delivery/Indefinite Quantity umbrella contract, pursuant to which the Army Sustainment Command ("ASC") issue[d] Task Orders to KBR to perform certain services. Cost Plus Award Fee ("CPAF") Task Orders were issued to [KBR] against the LOGCAP III contract for particular types of services in particular locations." KBR Ex. 3, Ritondale Decl. ¶ 5, ECF No. 136-2. A cost plus award fee contract is "a cost-reimbursement contract that provides for a fee consisting of (a) a base amount (which may be zero) fixed at inception of the contract and (b) an award amount, based upon a judgmental evaluation by the Government, sufficient to provide motivation for excellence in contract performance." 48 C.F.R. 16.405-2. LOGCAP III and the Task Orders issued under it are governed by the Federal Acquisition Regulation ("FAR"), codified at Title 48 of the Code of Federal Regulations.

After the government issued Task Orders, KBR and the government engaged in the process of definitization, meaning "the agreement on, or determination of, contract terms, specifications, and price, which converts the undefinitized contract action to a definitive contract." 48 C.F.R. 217.7401(b). During this process, KBR evaluated the statement of work ("SOW") accompanying a Task Order and prepared an estimate of its cost to perform those services. Ritondale Decl. ¶ 7. KBR and the government then negotiated the SOW and KBR's cost estimates before agreeing on a "negotiated estimated cost" for the services. Id. KBR was reimbursed for the costs it incurred in performing the services, including subcontractor costs. Id. It was not reimbursed for delivering particular results, but rather was "obligated to use its best efforts to achieve the scope of work specified in each Task Order," and was then "entitled to be reimbursed its allowable direct and indirect costs incurred in performing the contract." Ritondale Decl. ¶ 6–7.

After incurring costs for each Task Order, KBR submitted invoices for reimbursement to the government on public vouchers—Standard Form 1034. Id. ¶ 9. KBR extracted from its accounting system all direct and indirect allowable costs incurred on the Task Orders, including subcontractor costs, and submitted them on these forms. Id. These invoices were then reviewed by the Defense Contract Audit Agency ("DCAA"). Id. ¶ 10. The DCAA determined whether to allow the claimed costs based on reasonableness, allocability, Cost Accounting Standards Board standards or other general accounting principles and practices, the contract terms, and certain regulatory limitations. Id. ; 48 C.F.R. 31.201-2. "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business," which depends on "a variety of considerations and circumstances." 48 C.F.R. 31.201–3. A cost is generally allocable "if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship." 48 C.F.R. 31.201–4. If DCAA found that a cost was not allowable, it would recommend the suspension or disallowing of payment to KBR, after which the Defense Contract Management Agency ("DCMA") could disallow claimed costs. Ritondale Decl. ¶¶ 10–11.

B. Subcontracts

Mr. Barko's allegations relate to four types of subcontract: those for construction of the "man camp" at Site B6 (Counts VIII–X); those for laundry services (Counts I–VI, XII, XIII); those for water well drilling (Counts VII, XV); and those for labor (Counts XI, and XIV). Generally, Mr. Barko alleges that KBR employee Robert Gerlach had an improper and collusive relationship with D&P and was accepting kickbacks in exchange for rigging bids, suppressing competition, and awarding contracts to D&P. He also alleges double billing and overcharges on D&P subcontracts, and that KBR submitted material false statements in a Certified Claim for the work completed on the man camp construction contract after the contract was terminated for convenience. Mr. Barko claims that several instances of fraud were reported to KBR via its Code of Business Conduct ("COBC") policy—which it was required to investigate under the terms of the LOGCAP III contract—and via other reporting up the chain of command. The parties' briefs discuss in detail the four subcontracting areas and the allegations surrounding them. Many of the following facts and claims are disputed. The Court will briefly summarize Mr. Barko's allegations.

1. Site B6 "Man Camp" Construction Subcontract

First, with respect to the Site B6 "man camp" construction subcontract, Mr. Barko alleges various instances of anticompetitive bidding and activity. Mr. Barko claims that although the Subcontracts Administrator for the B6 subcontract was George Covelli, Gerlach made the contract award to D&P and falsely stated that Covelli had approved and signed the contract and determined the price fair and reasonable, Pl.'s Opp'n at 6–7, ECF No. 265. In addition, Mr. Barko claims that the B6 contract was a "time is of the essence" project, but that D&P was unable to meet the construction schedules—as known by KBR. Id. at 7. He states that D&P should have also been disqualified because the bid package was missing certain elements, and that the contract should have gone to Prime Projects International, "because they were the only contractor to mobilize to B6 at the time the B6 man camp was to be constructed, had already been awarded a Master Contract by KBR and had already demonstrated excellent construction capabilities at B6, and much liked by the client." Id. at 7–8. Mr. Barko claims that KBR employees had raised concerns that the contract had been improperly awarded to D&P, and that PPI was improperly excluded from consideration in violation of FAR Clause 52.203-7, which prohibits kickbacks. Barko SOF ¶¶ 88–89, ECF No. 265.

In addition, Mr. Barko raises issues with respect to D&P's...